Pakistan’s debt outlook has improved in recent years, with the public debt to GDP ratio falling to around 70 percent, as the government focuses on early repayments, longer maturities and lower servicing costs, Finance Minister Senator Muhammad Aurangzeb said on Sunday.
Referring to remarks by Saudi Finance Minister Mohammed AlJadaan, Aurangzeb said Pakistan’s policy experience reinforces the view that macroeconomic stability provides the foundation for durable economic expansion.
He added that Pakistan has made initial but meaningful progress through disciplined macroeconomic management, institutional reforms and proactive debt management, while acknowledging that reforms are still ongoing.
Speaking at a high-level roundtable on sovereign debt vulnerabilities at the AlUla Conference for Emerging Market Economies 2026, the finance minister said Pakistan’s recent experience shows that macroeconomic stability is essential for sustainable economic growth, not a barrier to it.
The conference was jointly organized by the Government of Saudi Arabia and the International Monetary Fund, bringing together policymakers from emerging and developing economies.
The finance minister noted that global public debt remains at historically high levels, putting sustained pressure on emerging economies through higher debt servicing costs, tight financing conditions and limited fiscal space. He said the key policy challenge is to manage debt in a way that prevents liquidity pressures from turning into solvency crises, while protecting growth-oriented and social spending.
The finance minister said Pakistan has remained on track to better manage public debt by extending maturities, reducing interest costs, and undertaking early repayments. These steps have helped bring the debt-to-GDP ratio down from about 74 percent over the past three years, while the external debt-to-GDP ratio has remained broadly stable, easing refinancing risks and generating interest cost savings.
He also highlighted Pakistan’s move toward regular and transparent debt sustainability analysis aligned with IMF and World Bank methodologies. According to him, the inclusion of domestic debt, external liabilities, and government guarantees has improved risk assessment, strengthened engagement with creditors, and supported market confidence, in line with the objectives of the G20 Common Framework.
On the revenue side, the finance minister said Pakistan has made progress in domestic resource mobilization, with the tax-to-GDP ratio now moving around 12 percent, compared with single-digit levels in earlier years. He attributed this to tax reforms, digitization, and measures to broaden the tax base.
Aurangzeb also pointed to steps taken to align debt management with climate and development goals, including the issuance of a Green Sukuk and the establishment of a Sovereign Sustainable Financing Framework.
Concluding his remarks, the finance minister stressed that addressing sovereign debt vulnerabilities requires early action, strong institutions, transparency, and credible policy frameworks, supported by greater global coordination.
He said stronger creditor cooperation and the integration of climate resilience into debt frameworks would be critical for emerging economies to manage debt sustainably while preserving growth and development priorities.
